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Why Are You Here?

The world seems to have turned on you without warning.  Your family is scared.  Your wife or husband blames you for the anxiety that now enshrouds your life.  Sleepless nights are the norm.  You are on a short fuse and find yourself snapping at the one’s you love without provocation.  Your health is suffering.  Nasty calls from the bank are part of your daily routine.  You fear going to the mailbox, because you don’t know what notice from the bank or servicing company might be waiting for you.

You worked hard to become a homeowner.  It was one of the proudest days of your life when you walked away from the closing table with keys to your own home.  Maybe you had just got married, or maybe you were starting a family.  There were handshakes and smiles all around.  The bank’s attorney provided you with seemingly endless documents to sign.  You didn’t know what many of them meant.  The bank gave you a mortgage.  They checked your earnings, or maybe didn’t, but told you the loan was affordable.  You trusted them.  Your real estate broker and mortgage broker told you that it was a good deal.  You believed them.  What went wrong?

You are not alone.  Don’t lose hope.  It is not your fault you are in this situation.  If you got a mortgage between 2004 and 2010, you were one of the victims of one of the greatest scams in modern times.

You can turn this around, but it is a big problem and you are going to need help.  The entire mortgage servicing business is designed to keep you off balance and to confuse and frustrate you.  It is not a fair fight.  The bank has attorneys and bill collectors and an entire call center.  Against their deep pockets and endless resources, you feel helpless and beleaguered.  They have you right where they want.  You’ll agree to almost anything to end this nightmare.

It doesn’t seem like it, but you can save your home.  You can work out a modification or settlement with the bank.  But, you are going to have to fight back.  You are going to have to be diligent and prepared.  We can help.  We deal with these situations every day.

It is like getting news you have cancer.  It is bad news.  But, there is a treatment.  It isn’t easy or fun.  It is a tough life and death struggle.  But, its one that you can win with faith, good care, and the right advocate on your side.  You wouldn’t try to treat your own cancer, and you should not try to defend your own foreclosure.

What Are Your Options?

Most foreclosure cases follow one of four paths: (1) re-finance; (2) modification or settlement; (3) short sale; or (4) deed in lieu of foreclosure and/or cash for keys.  If your financial affairs are healthy enough, re-finance and get a new loan.  If not, you must work through the other options one at a time, and you will probably need to fight the bank in Court or outright sue them to gain the leverage you need.

Now is the Time to Act.  If you have received a Summons and Complaint, you need to act right away.  You need to take the fight to the banks and turn the tables before they get the upper-hand.  If this hasn’t happened yet, you still have time to prepare and the sooner you start the better off you’ll be.


Q.           What Do I Do When Served with a Foreclosure Summons and Complaint?

A.            Hire an attorney right away!  After being served with a foreclosure Summons and Complaint, you have 35 days in NJ and 20 or 30 days in New York to file an Answer.  This is your chance to assert your claims against the bank.  This is a “speak now or forever hold your peace” moment.  If you don’t fight the foreclosure, the Court will enter default against you and the bank will be able to proceed to judgment and sheriff’s sale.

Q.           Should I hire an Attorney?

A.            Yes.  If you want to fight the bank and raise all available claims and defenses, you need a good lawyer.  If you had a heart attack and your arteries were blocked, you wouldn’t try to do your own heart surgery.  Litigation is the same way.  Even if you are bright, articulate and understand the law, there are procedural rules that must be followed in a Court case that you will not be able to get up to speed with on the fly. 

Q.           What Should I Do if I Receive a Motion for Summary Judgment In The Mail?

A.            When the bank moves for Summary Judgment, you are in trouble.  If you have been handling your own case, the bank is telling the Judge that they have enough evidence for the Judge to call the case in their favor without giving you any further chances to fight back or go to trial.  Think of Summary Judgment like a TKO in a boxing contest.  You are still standing.  You haven’t lost or been knocked out, but the Referee calls the fight, because you are too badly beat up to possibly win.  Once a Summary Judgment motion is granted, this is irreversible damage.  It takes a Herculean effort to raise your claims once the bank gets Summary Judgment.  It is not the end of the road, and since Summary Judgment is routinely granted in these cases, there are still options to continue the fight.  However, it means the loss of a host of critical opportunities to get your story heard by the Judge and to negotiate a favorable settlement.  You need to oppose this motion, and FAST!  You need to call an attorney right away.

Q.           What is the Difference Between an Attorney and a Modification Firm?

A.            When that Summons and Complaint appears in the mail, its time to hire an attorney.  The sooner you have an attorney on your team, the better they will be able to frame and articulate the predatory practices, fraudulent modification promises, and other violations the bank has engaged in – and to determine if these issues really exist in your case – because you don’t want to raise claims that don’t fit the facts of your case and lose credibility with the Court.  If an attorney is on the case early on, before a Complaint is filed, there will be more time to investigate.  Documenting the violations that exsit in your particular case, and detailing the facts that led you to stop paying your loan, can form a bridge to settlement, and the better your case, the more successful a lawyer will be in putting together a viable modification package and settlement proposal.

                Before getting a Summons and Complaint, you can submit modification packages to the bank’s loss mitigation people, either independently yourself, or with the help of a service provider, including the help of an attorney.  However, you need to understand two key facts:

Fact #1Few modifications are approved.  How few?  Well some statistical studies (relying on bank provided data) have broken down the number of modifications granted by the 8 largest servicers.  One study shows that between 10% and 20% of modifications are approved.


However, other evidence suggests it is far fewer, as low as a fraction of a percent for some banks.  One thing is for sure, certain banks are better than others at granting modifications on loans they service.  AHM seems to be among the best, and One West, CitiMortgage and JP Morgan Chase seem to have the lowest rates of modification among the Big 8.

Fact #2Banks are disincentivized to modify loans.  Why?  They get paid fees to service the delinquent loans in their portfolio.  Wells Fargo, the biggest servicer, may make as much as 10% of its total company revenue doing this, depending on which study you read.  This leads to perverse incentives not to modify loans, to delay and lie to homeowners about the status, and to lose important paperwork.  Bank of America, in particular, has been cited by numerous authorities for atrocious violations in this regard.  While Wells Fargo for instance has a strong disincentive to modify loans, Wells Fargo is aslo very good about modifying qualifying loans if your paperwork is actually in order – they just don’t help much getting you to the finish line.  Confused?  Part of the problem is that the banks traditionally did not have the highest level employees or the best trained employees on their loss mitigation teams, and these individuals were not incentivized to “guide you” through the process to get a modifciation.  It was a “take it or leave it” affair.  Recently, the banks have stepped up their game and you have a far better shot at getting a modification and getting meaningful help; but, in our experience, the cases in litigation tend to get priority for underwriting review/modification and settlement.  It is better to modify the loan before it gets to litigation, but if you haven’t litigation is a time when the banks natural “discincentive” to work with you flips and they are “incentivized” to get a concrete result.  You can take advantage of this shift in momentum to strike a deal that you were having trouble with previously, despite your best efforts.

The good news is that the banks are getting much better.  The bad news is they still steamroll the uninformed and those that have ‘difficult modifications’ that don’t fit neatly into any of their criteria or that have difficult issues.  Say its an investment property, you have a prior bankruptcy, your credit is blemished, you own your own business, recently started a new job, or you have multiple investments.  These are the kind of ‘risky situations’ the banks don’t like to see and these facts can derail you – these cases must be carefully presented to the bank, addressing the reasons for the problem and why it doesn’t mean a lower likelihood you’ll pay the loan in full.  One of the fallouts of the mortgage meltdown is the banks don’t want to “kick the can down the road.”  That would happen if they worked out bad loans, that shouldn’t have qualified, and those loans defaulted a year or two down the line.  They have a ‘moral’ or ‘ethical’ obligation to “clean house” and clear out bad loans, while salvaging those that can be modified using sound underwriting.

Given these two important facts, you stand a far better chance of being granted a modification, once you are seriously delinquent and in foreclosure, if you have an attorney on board.  Most individuals who have really good credit and meet all the qualification criteria outright should be able to get a modification themselves, without any assistance.  But, how many of these end up in foreclosure?  Almost every case we see has multiple issues that need to be presented carefully and explained in order for an underwriter at the bank to sign off on it.  If you haven’t succeeded yet, depsite your own diligent efforts to modify, that is an indication that you may need to take a different approach and create some leverage in the negotiation process and get someone higher up the food chain, outside the call center, to take a look at your case and approve your modification.  A lawyer can help do that, especially if your case involves predatory practices, modification fraud, or other condemnded practices.  We can’t change your financial numbers.  We can’t promise you a modification.  We are working with the same formula that anyone else would, but we are also in a highly risky litigation setting where the bank is very uncomfortable, and where there is legal recourse for mistakes made against you and violations you have suffered.  As a result, we can usually get higher level people on the phone than you might be able to, we can work with the bank’s attorneys to get approval for your situation, and we can create pressure for the bank to enter the modification so as to avoid being called on the carpet for all the violations of the various consumer protection laws that have occurred in your case.

Q.           Are We Getting Kicked Out of Our House Tomorrow?

A.            No.  The foreclosure process has many steps and many opportunities to fight or negotiate with the bank.  We have had clients who had foreclosures that started in 2005 with judgments from 2007 that worked out modifications on the eve of Sheriff’s Sale in 2012.  It is not the norm that cases take that long, but they tend to take a very long time.  In both NJ and NY, cases seem to average between 2 to 3 years, but the judiciary is constantly making efforts to speed up the process. 

                A 2011 study examined how long it took for foreclosures to go through in various states. See Third Quarter and September 2011 U.S. Foreclosure Market Report (Oct. 11, 2011), available at, http://www.realtytrac.com/content/press-releases/third-quarter-and-september-2011-us-foreclosure-market-report-6880New Jersey ranked second-worst in the country and New York ranked worst in the country.  In New Jersey, the average foreclosure takes 974 days to resolve.  In New York, the average foreclosure takes 986 days to resolve.  If you are a homeowner in foreclosure, this is great news, but not for the reason you think.  You may be thinking, “Phew, I can sit back and do nothing and I’ve got three years in my home.”  Nothing could be more foolish.  If you want to keep your home, your odds of striking a deal go down with every passing month.  Firstly, the banks add the arrearage in to the end of your loan and increases the “down-payment” amount you would have to pay in a modification.  So, you aren’t strictly “saving money” by not paying your mortgage, you are just racking up a bigger tab.  Secondly, the banks look at the time since you defaulted as a negative thing.  If you come forward to work something out sooner, they will take you more seriously than someone who has not paid in three (3) years.  They view this as an indicator of responsibility and initiative.  These are soft factors that don’t play in the numbers, but have a lot of impact on how quickly bank reps move your application through the process and how vocal or silent they may be in advocating for your modification internally.  You want to turn the bank loss mitigation people and the attorney’s on the other side of the case into “double agents” who are part of your team and who are fighting for you to get modified, and believe that you and your family are deserving of this relief.  Sitting on your laurels and taking advantage of the length of the foreclosure process does not increase your credibility and empathy from the bank, its attorneys or the Judge.

With these time frames in mind, there are cases that for no apparent reason seem to go on forever as well as those that move with lightning speed.  Each case is different.  But, with the right legal guidance, you should be able to get all the time you need to take your best shot at saving your home.  You will definitely get the time you need to make important decisions, weigh your options, and make plans.  You are not going to get kicked out on the curb without warning if an attorney is representing you in your case.

Q.           Do I Have to Stop Paying My Mortgage to Qualify for a Modification?

A.            No.  This is one of the biggest myths out there.  If the bank tells you this, you should keep a record of when you were told, who told you, and under what circumstances.  When banks say this, they are making a very damaging false representation. 

Q.           What Are My Defenses to Foreclosure?

A.            There are a few key defenses that get you traction and can become a bridge to a settlement: (1) standing; (2) predatory lending; (3) document irregularitieis; and (4) modification fraud.  Every defense is unique. 

                Standing:  Maybe the bank is missing the original Note, key assignment documents, or you are being sued by a strange foreign Trust.  You may have a defense that the party suing you really has an interest in your loan, or more importantly, legal authority and an ability to negotiate with you to settle.  A “stranger to the transaction” who has no “dog in the fight,” such as a servicer, Trustee, or nominee, should not be the one you have to negotiate with you.  It is unfair for several reasons: (1) they may not really have authority to settle with you; (2) they may not stand to lose anything, making it unfair for you to have to sell your case to them; and (3) they may just simply have no legal right to be involved in your case.  Judge’s have grown increasingly insensitive and calous to this defense, but if it is presented properly, the law is fairly clear, and in appropriate cases, this can be a powerful weapon.

                Predatory Lending:  If you have an adjustable rate loan that kept jumping up every few years, based on a stated application, have a pick-a-payment loan, a jumbo loan, or a loan that exceeded the property value, this raises the question… did the bank really expect you to pay this loan back?... and did you go into this with eyes wide open or were you duped?  A Judge is going to view any fraud in the origination of the loan as a violation of the law, and depending on what actions you took to raise the issue, it can be an impediment to the bank moving forward.  One of the biggest problems with predatory lending is that there are short windows of time to raise these issues, and many foreclosures occur after the expiration of the time to protest these issues has passed.

                Document Irregularities:  If the people who examine your loan documents don’t have “personal knowledge” how can anyone be sure that the right decision is being made in the litigation?  For this reason, a missing Note, or the failure of anyone to actually physically look at the Note, can be a roadblock.

                Modification Fraud:  Right now this is the hot issue.  Judges are furious at banks for stringing along homeowners.  The original loan might have been ok, or not that bad.  The bank might have did a good/passable job originating, and they may have their documents in order.  But, if they led you down the primrose path believing a modification was in the offing and then slammed the door in your face by suing you without warning – you have a case against them for that independent fraud – and one that has a lot of emotional force to get everyone involved (from bank’s attorney, to Court, to Loss Mitigation people, to mediator) to help you get a settlement and get the case out of Court.

Q.           Can I Sue the Bank?

A.            Yes.  And you probably should.  This is called a CounterClaim.  There are State consumer protection laws like the Consumer Fraud Act in New Jersey (N.J.S.A. 56:8-2) and General Obligations Law 349 and 350 in New York.  These laws, in particular, prohibit false advertising, fraudulent business practices, and unfair treatment of consumers.  There are also federal statutues, particularly the Fair Debt Collection Practices Act that Congress passed to reign in banks and prevent abusive practices.  Another common Counterclaim is garden variety Fraud.  Another common Counterclaim is Breach of Contract.  This comes up a lot in the context of Modifications that went through, but which the bank didn’t follow through on.

                Claims in court are usually either “Tort” or “Contract” based.  A tort is like a slight or a violation.  Someone did something to you and you were injured.  They pushed you.  They lied.  They interfered.  Contract actions are based on a promise that was broken.  All of the claims you can bring against the bank fall into one of these categories.  A lawyer can frame them for you.  But, the important point is this.  If you were lied to.  If a promise was broken.  If you were hurt unfairly.  These are the actions that can support a claim for “Breach of Contract” or “Fraudulent Misrepresentation.”

Q.           What is the Consumer Fraud Act in New Jersey?

A.            The Consumer Fraud Act, N.J.S.A. 56:8-2, prohibits:

“The act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing[] concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of merchandise… “

A consumer who can prove (1) an unlawful practice, (2) an ascertainable loss, and (3) a causal relationship between the unlawful conduct and the ascertainable loss, is entitled to legal and/or equitable relief, treble damages, and reasonable attorneys' fees, N.J.S.A. § 56:8-19.  The broad language of the provisions of New Jersey's Consumer Fraud Act (CFA), N.J.S.A. §§ 56:8-1 to 56:8-195, encompasses the offering, sale, or provision of consumer credit.  New Jersey's Consumer Fraud Act, N.J.S.A. §§ 56:8-1 to 56:8-195, prohibits fraud in connection with the subsequent performance of a loan.  Lending institutions and their servicing agents are not immune from New Jersey's Consumer Fraud Act, N.J.S.A. §§ 56:8-1 to 56:8-195; they cannot prey on the unsophisticated, those with no bargaining power, those bowed down by a foreclosure judgment and desperate to keep their homes under seemingly any circumstances.  A plaintiff asserting a claim under New Jersey's Consumer Fraud Act (CFA), N.J.S.A. §§ 56:8-1 to 56:8-195, must prove that the defendants acted contrary to the permissible standard of conduct under the CFA. The standard of conduct that the term "unconscionable" implies is lack of good faith, honesty in fact and observance of fair dealing.  With respect to the applicability of New Jersey's Consumer Fraud Act (CFA), N.J.S.A. §§ 56:8-1 to 56:8-195, to a post-foreclosure-judgment agreement involving a stand-alone extension of credit, in fashioning and collecting on such a loan--as with any other loan--a lender or its servicing agent cannot use unconscionable practices in violation of the CFA.

Q.           What is the Foreclosure Mediation Program (FMP) in New Jersey – And Should I Take Advantage Of It?

A.            Empirical evidence suggests that about 40% of cases that go through the FMP get resolved within three (3) months of mediation.  This is huge!  First, not all homeowners qualify for a modification.  Second, we already noted that by the banks own statistics only 10% to 20% of loans in foreclosure get modified.  This means that your odds of getting a modification are at least doubled when you participate in the FMP.  One of the reasons is that a trained mediator with background in the foreclosure process and mortgage underwriting will “weigh in” and actively push the parties toward a resolution.  Unlike a Judge, who has to police the procedural rules of Court, and must maintain detached and disinterested equanimity, a mediator can take the homeowner’s side and frequently does.  Anyone in New Jersey facing a foreclosure of their home who is serious about keeping it should participate in the FMP.  As lawyers, we highly recommend legal counsel, both in fighting the underlying lawsuit and in dealing with the foreclosure mediation process.  However, the single most powerful tool in fighting a foreclosure is the FMP.  Even more important than hiring a lawyer is getting a package together and participating in this court-sponsored program.  Don’t miss out on your best chance of working out a modification and saving your home!!  Additional information and links to forms are available on the foreclosure section of our website.

The FMP is designed to provide homeowners with options regarding mortgage modification and restructuring. The FMP's flexibility allows homeowners to request loan modification through mediation even after an entry of final judgment and up to the conclusion of a sheriff's sale. See Gonzalez v. Wilshire Credit Corp., 207 N.J. 557, 581, 25 A.3d 1103 (2011). Access to the FMP is available where: 1) the property is the homeowner's primary residence; 2) the homeowner is the borrower on the mortgage being foreclosed; and 3) the property is an owner-occupied one to three-family residential property. See Sturdy Sav. Bank v. Roberts, 427 N.J. Super. 27, 43, 46 A.3d 632 (Ch. Div. 2012).

Eligible homeowners have access to housing counselors, attorneys, and court-trained mediators in an effort to "resolve foreclosure actions by proposing work-out and payment arrangements that accommodate the circumstances of distressed borrowers and the financial interests of lenders." See New Jersey Housing and Mortgage Finance Agency, Request for Proposals for Legal Services for the New Jersey Judiciary's Foreclosure Mediation Program, 1 P 1.1 (Dec. 29, 2008).

If the homeowner wishes to participate in the FMP, homeowners are required to assemble and provide certain financial documentation prior to participation in the program. This approach allows the mortgagee, mortgagor and mediator to arrive at mediation sessions with the information necessary to reach an informed and appropriate resolution, if possible. First, the debtor must file a Mediation Request Statement with the New Jersey Office of Foreclosure. Following preliminary  approval, homeowners seeking to participate in the FMP must submit a Foreclosure Mediation Financial Worksheet. See Foreclosure Mediation Financial Worksheet (Oct. 2012), available at http://www.judiciary.state.nj.us/civil/forms/11269_hud_njhmfa_med_financial_wkst.pdf.

Mediation is devised to help homeowners and lenders reach a mutually agreeable resolution in an effort to avoid foreclosure. Mediators have "an active role in promoting candid dialogue 'by identifying issues [and] encouraging parties to accommodate each others. [sic] interests'" in an effort to reach a settlement. State v. Williams, 184 N.J. 432, 447, 877 A.2d 1258 (2005) (quoting Michael L. Prigoff, Toward Candor or Chaos: The Case of Confidentiality in Mediation, 12 Seton Hall Legis. J. 1, 2 (1988)). A study of a New Jersey court-mandated mediation program found that nearly 40% of matters diverted to mediation were resolved during mediation or within three months thereafter, most "with little or no discovery" and without the large cost to disputants. See New Jersey Civil Complementary Dispute Resolution Newsletter, Evaluation of the Presumptive Mediation Program, at 2 (Sept. 2008, Vol. XII, Issue 2), available at http://www.judiciary.state.nj.us/newsletters/cdr_12_02.pdf.

Category: Foreclosure Law


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